TV AZTECA ANNOUNCES 7% NOMINAL SALES GROWTH FOR 3Q08
—EBITDA of Ps.1,024 Million in the Quarter—
—Net Income Grew 12% in Nominal Terms—
FOR IMMEDIATE RELEASE
Mexico City, October 23, 2008—TV Azteca, S.A. de C.V. (BMV: TVAZTCA; Latibex: XTZA), one of the two largest producers of Spanish-language television programming in the world, announced today net sales of Ps.2,614 million and EBITDA of Ps.1,024 million for the third quarter of 2008. EBITDA margin for the period was 39%.
In nominal terms—considering figures for each quarter in current pesos—sales grew 7%, EBITDA increased 2%, and net income rose 12%.
“Our attractive programming options this quarter were complemented with solid coverage of the Summer Olympic Games in Beijing, once again expanding advertising demand within our content,” said Mario San Román, Chief Executive Officer of TV Azteca. “Our clients’ preferences translated into top line growth—for the third consecutive third quarter—and determined EBITDA and net income increases in the period.”
Third Quarter Results
As detailed in previous financial reports, changes in financial reporting standards were implemented this year. Under the new rules, 2008 figures are expressed in current pesos, while 2007 figures are reported in constant pesos as of December 2007.
The following analysis presents financial results under the new rules.
3Q 2007 3Q 2008 Change
Ps. % Nominal*
Net Sales $2,469 $2,614 $145 6% 7%
EBITDA $1,019 $1,024 $5 1% 2%
Net Majority Income $447 $492 $46 10% 12%
Net Income per CPO $0.15 $0.17 $0.02 10% 12%
EBITDA: Operating Profit Before Depreciation and Amortization. The number of CPOs outstanding as of September 30,2008 was 2,946 million. Figures of 3Q07 in millions of pesos of constant purchasing power as of December 31, 2007, and figures of 3Q08 in current pesos. * Change in nominal terms is included to help in the analysis of this report. The nominal change is equivalent to adding the accumulated inflation between September and December of 2007 to the change within the new financial reporting rules.
Net Sales
“The popularity of our content translated into a 39% full day share of the Commercial Audience in the quarter, which resulted in solid demand for advertising spaces in all of the time slots, and increased sales,” added Mr. San Román. “The coverage of the Summer Olympic Games, with our comprehensive sports analysis, was an additional boost to domestic revenues.”
Third quarter revenue includes sales of Ps.37 million from Proyecto 40, which have been consolidated in TV Azteca results beginning this year.
TV Azteca also reported net sales from Azteca America—the company’s wholly owned broadcast television network focused on the U.S. Hispanic market—of Ps.120 million, compared to Ps.139 million a year ago. The reduction this quarter is related to the adverse economic environment in the United States.
Programming sales to other countries were Ps.14 million in the period, compared to Ps.26 million the prior year. Revenue this quarter resulted from the sale of the shows Lo que Callamos las Mujeres and Montecristo, in Latin America, and Bellezas Indomables in Europe.
Revenue from barter sales was Ps.87 million, practically unchanged from Ps.86 million from the previous year.
Costs and Expenses
Total costs and expenses grew 10% in the quarter, as a result of a 12% increase in programming, production and transmission costs—to Ps.1,298 million, from Ps.1,156 million in the same period a year ago—and a 1% reduction in selling and administrative expenses—to Ps.292 million, compared with Ps.295 million in the same quarter of 2007.
2 The increase in costs reflects the consolidation of Proyecto 40 in TV Azteca results, and the production and transmission of the Summer Olympic Games in Beijing.
Decrease in selling and administrative expenses resulted from reductions in operating expenses and advisory fees, despite increased business operations this quarter, reflecting efficiency gains in the period.
EBITDA and Net Income
EBITDA was Ps.1,024 million, 1% above the Ps.1,019 million in the same period of the prior year; EBITDA margin was 39%.
Below EBITDA the main changes were: i) reduction of Ps.37 million in other expenses, resulting from lower legal fees; ii) decrease of Ps.29 million in the provision for income tax; iii) a Ps.33 million improvement in the results of minority stockholders, and iv) a Ps.22 million decrease in comprehensive cost of financing, mainly derived from increased foreign exchange gains.
The company has a net asset monetary position in US dollars of US$249 million, which together with a peso depreciation this quarter, resulted in exchange gains.
TV Azteca does not have exchange rate derivative instruments, thus recent changes in the foreign exchange rates have no additional influence in the company results.
Net majority income for the period was Ps.492 million, 10% above the Ps.447 million from a year ago.
Outstanding Debt
As of September 30, 2008, TV Azteca’s outstanding debt—excluding Ps.1,292 million debt due 2069—was Ps.7,703 million.
99% of such debt is peso denominated, and of it, Ps.6,000 million are Securities Certificates that have gradual maturities starting in 2012. Their interest rate is fixed at 9.29% annually, thanks to interest coverage for the next three years.
The cash balance was Ps.2,699 million, which resulted in net debt of Ps.5,004 million. Debt to last twelve months (LTM) EBITDA ratio was 1.9 times, and net debt to LTM EBITDA was 1.2 times.
Nine Months Results
Net sales in the first nine months of the year were Ps.6,906 million, up 5% from the Ps.6,607 million of the same period of 2007. Total costs and expenses were Ps.4,415 million, from Ps.4,101 million in the same period a year ago. As a result, TV
3 Azteca reported EBITDA of Ps.2,491 million, compared with Ps.2,506 million in the first nine months of the prior year.
The company recorded a majority net gain of Ps.191 million, compared with net income of Ps.855 million in the same period of 2007. Reduced net gain was due to an extraordinary increase, in the first quarter of 2008, in the deferred income tax of Ps.474 million—due to presales registered in the period—as well as the creation of a reserve of prior years’ Proyecto 40 preoperating expenses of Ps.234 million, also in the first quarter of the year.
9M 2007 9M 2008 Change
Ps. % Nominal*
Net Sales $6,607 $6,906 $299 5% 6%
EBITDA $2,506 $2,491 $(14) -1% 1%
Net Majority Income $855 $191 $(665) -78% -77%
Net Income per CPO $0.29 $0.06 $(0.23) -78% -77%
EBITDA: Operating Profit Before Depreciation and Amortization. The number of CPOs outstanding as of September 30,2008 was 2,946 million. Figures of 9M07 in millions of pesos of constant purchasing power as of December 31, 2007, and figures of 9M08 in current pesos. * Change in nominal terms is included to help in the analysis of this report. The nominal change is equivalent to adding the accumulated inflation between September and December of 2007 to the new financial reporting rules.
Company Profile
TV Azteca is one of the two largest producers of Spanish-language television programming in the world, operating two national television networks in Mexico, Azteca 13 and Azteca 7, through more than 300 owned and operated stations across the country, and Proyecto 40 that is broadcast on UHF. TV Azteca affiliates include Azteca America Network, a new broadcast television network focused on the rapidly growing U.S. Hispanic market, and Azteca Web, an Internet company for North American Spanish speakers.
TV Azteca is a Grupo Salinas company (www.gruposalinas.com), a group of dynamic, fast-growing, and technologically advanced companies focused on creating shareholder value, contributing to build the middle class of the countries in which they operate, and improving society through excellence. Created by Mexican entrepreneur Ricardo B. Salinas (www.ricardosalinas.com), Grupo Salinas operates a as a management development and decision forum for the top leaders of member companies. The companies include: TV Azteca (www.irtvazteca.com), Azteca America (www.aztecaamerica.com), Grupo Elektra (www.grupoelektra.com.mx), Banco Azteca (www.bancoazteca.com.mx), Afore Azteca (www.aforeazteca.com.mx), Seguros Azteca (www.segurosazteca.com.mx) and Grupo Iusacell (www.iusacell.com). Each of the Grupo Salinas companies operates independently, with its own management, board of directors and shareholders. Grupo Salinas has no equity holdings. However, member companies share a common vision, values and strategies for achieving rapid growth, superior results and world-class performance.
Except for historical information, the matters discussed in this press release are forward-looking statements and are subject to certain risks and uncertainties that could cause actual results to differ materially from those projected. Other risks that may affect TV Azteca and its subsidiaries are identified in documents sent to securities authorities.
Investor Relations: Bruno Rangel Dinorah Macìas + 52 (55) 1720 9167 + 52 (55) 1720 0041 [email protected] [email protected]
Press Relations: Tristan Canales Daniel McCosh + 52 (55) 1720 1441 + 52 (55) 1720 0059 [email protected] [email protected]
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TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS (Millions of Mexican pesos of December 31 2007, and September 30 2008 )
Third Quarter of : 2007 2008 Change
Net revenue Ps 2,469 100% Ps 2,614 100% Ps 145 6%
Programming, production and transmission costs 1,156 47% 1,298 50% 142 12% Selling and administrative expenses 295 12% 292 11% (3) -1%
Total costs and expenses 1,450 59% 1,590 61% 139 10%
EBITDA 1,019 41% 1,024 39% 5 1%
Depreciation and amortization 98 113 14
Operating profit 920 37% 911 35% (9) -1%
Other expense -Net (205) (168) 37
Comprehensive financing result: Interest expense (197) (227) (30) Other financing expense (10) (42) (32) Interest income 15 11 (4) Exchange (loss) gain -Net (0) 115 116 Gain on monetary position 27 - (27) (165) (143) 22
Income before the following provision 551 22% 601 23% 50 9%
Provision for income tax (136) (107) 29
Net income Ps 414 Ps 493 Ps 79
Net (loss) gain income of minority stockholders Ps (32) Ps 1 Ps 33
Net income of majority stockholders Ps 447 18% Ps 492 19% Ps 46 10%
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TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED RESULTS OF OPERATIONS (Millions of Mexican pesos of December 31 2007, and September 30 2008 )
Period ended September 30, 2007 2008 Change
Net revenue Ps 6,607 100% Ps 6,906 100% Ps 299 5%
Programming, production and transmission costs 3,244 49% 3,548 51% 303 9% Selling and administrative expenses 857 13% 867 13% 10 1% Total costs and expenses 4,101 62% 4,415 64% 314 8%
EBITDA 2,506 38% 2,491 36% (14) -1%
Depreciation and amortization 308 349 41
Operating profit 2,197 33% 2,142 31% (56) -3%
Other expense -Net (443) (559) (116)
Comprehensive financing result: Interest expense (599) (608) (9) Other financing expense (65) (102) (38) Interest income 79 70 (9) Exchange (loss) gain -Net (13) 40 54 Gain on monetary position 27 - (27) (571) (600) (29)
Income before the following provision 1,183 18% 982 14% (201) -17%
Provision for income tax (329) (317) 13 Deferred incom taxes - (474) (474)
Net income Ps 854 Ps 192 Ps (663)
Net (loss) gain income of minority stockholders Ps (1) Ps 1 Ps 2
Net income of majority stockholders Ps 855 13% Ps 191 3% Ps (665) -78%
6 TV AZTECA, S.A. DE C.V. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS (Millions of Mexican pesos of December 31 2007, and September 30 2008 )
At September 30, 2007 2008 Change Current assets: Cash and cash equivalents Ps 1,660 Ps 2,699 Ps 1,039 Accounts receivable 3,767 3,339 (428) Other current assets 1,310 1,548 238 Total current assets 6,737 7,586 849 13%
Long-term accounts receivable from Pappas and Unefon 1,430 1,663 234 Exhibition rights 553 554 1 Property, plant and equipment-Net 2,887 3,119 232 Television concessions-Net 4,640 4,636 (4) Other assets 1,438 1,564 126 Goodwill -Net 155 155 - Deferred income tax asset 884 - (884)
Total long term assets 11,987 11,691 (295) -2%
Total assets Ps 18,724 Ps 19,277 Ps 554 3%
Current liabilities: Short-term debt Ps 294 Ps 1,703 Ps 1,409 Other current liabilities 3,444 3,317 (127) Total current liabilities 3,738 5,020 1,282 34%
Long-term debt: Structured Securities Certificates 6,091 6,000 (91) Long-term debt - - - Total long-term debt 6,091 6,000 (91) Other long term liabilities: Advertising advances 3,005 2,909 (96) Exhibition rights payable 37 17 (20) American Tower Corporation (due 2069) 1,327 1,292 (35)
Total other long-term liabilities 4,369 4,218 (151) -3%
Total liabilities 14,198 15,238 1,040 7%
Total stockholders' equity 4,526 4,039 (487) -11%
Total liabilities and equity Ps 18,724 Ps 19,277 Ps 553 3%
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